§2.1.2 Supply substitution

32. The substitutability of products from the perspective of suppliers (supply substitution) can be relevant for market definition where suppliers use the same assets and processes to produce related products that are not substitutes for customers, and where this leads to similar conditions of competition across the range of such related products. In such cases, it may be appropriate to include such related products in the relevant product market, provided the constraining effect of supply substitution across the range of products is equivalent to that of demand substitution in terms of effectiveness and immediacy. 33. The necessary conditions for the market to be broadened based on supply substitution are that most, if not all, suppliers are able to switch production between products in the range of related products (57); that suppliers incur only insignificant additional sunk costs or risks when they switch production; that suppliers have the incentive to and would do so when relative prices or demand conditions change; and that they can offer all products in the range effectively in the short term (58). 34. Situations of sufficiently strong supply substitution may typically arise when undertakings market a range of qualities or grades of a particular product. For example, in a case relating to the production of stainless steel (59), the Commission found that, from a demand point of view, customers could not use different grades of stainless steel or families of grades for the same purpose. However, it was possible for manufacturers to switch from the production of one grade to another in the short term and using the same equipment, with limited additional costs. In the absence of particular difficulties in distribution, stainless steel manufacturers were therefore able to compete for orders of the various grades. The Commission therefore included the various grades of stainless steel in the same relevant market. 35. Supply substitution can also be relevant for market definition when customers purchase bespoke products, for example, when customers issue calls for tenders for construction projects or the procurement of trains or gas turbines. In such cases, there may be no or limited demand substitution between the bespoke products for different customers. From the perspective of demand substitution, each such bespoke product could then constitute its own relevant market. However, when the competitive constraint on the undertaking(s) involved in such cases results from the ability of other suppliers to produce the specific bespoke product, competitive conditions may nevertheless be similar across different customers. Therefore, when the same suppliers can and generally do respond with offers that meet the specifications of different customers, for example in different calls for tenders, the different bespoke products can be included in the same relevant product market. 36. Where only some of the suppliers have the ability and incentive to switch production and offer the products effectively in the short term and would do so, it is not appropriate to include the product range in the same relevant market (60). When carrying out the competitive assessment, the Commission nevertheless takes into account the competitive constraint exercised by those suppliers that meet the conditions, including whether they are likely to expand their sales of the relevant products in the future when the case calls for a forward-looking assessment. An example of this approach is the Commission’s assessment of the market for metallic coated steel (61). The Commission concluded that the conditions for supply substitution regarding tinplate and electrolytically coated chromium steel were not met in that case because only one competing supplier was able to produce those products on the same production line and because producing both products on ‘swing lines’ capable of switching did not play a material role in the market. However, the Commission took into account the constraint exerted by the supplier that was able to produce tinplate and electrolytically coated chromium steel on ‘swing lines’ in its competitive assessment. 37. Similarly, where supply substitution would entail the need to significantly adjust existing tangible and intangible assets outside the regular course of business; to incur more than insignificant additional investments, sunk costs or risks; to take strategic decisions of a lasting nature, or to incur time delays, the Commission does not widen the relevant market based on supply substitution. The Commission may not widen the relevant market based on supply substitution even if producers are already involved in production across the range of related products. For example, although certain producers of cheese may be able to produce several types of cheese, there may be significant costs and lead times involved before a producer of one type of cheese can switch production and start selling a different type of cheese (62). In such cases, the Commission examines the effects of such switching in the competitive assessment as a constraint exerted by potential competition.

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Source: EUR-Lex (Cellar) · retrieved 2026-09-07